I trust that most everyone here gets that the spending crisis is overwhelmingly a function of entitlements; and so this thread to focus on this.

WSJ: CLASS Warfare

The House votes today on repealing one of the Affordable Care Act's major new subsidy programs, and the referendum deserves more attention than it will probably get. The important point is not merely eliminating one of ObamaCare's worst abuses, but that the entitlement state might shrink for the first time in generations.

Known by the acronym Class, the long-term care insurance program for nursing homes and the like was grafted onto the health-care bill mostly to hide that bill's true costs. Class came with a five-year waiting period before it started to pay out benefits, but it started collecting revenues immediately. The front-loading helped ObamaCare appear to reduce the deficit in the short run—even though the Class Act was designed to go broke after a decade, which is outside the Congressional Budget Office's 10-year budget window.

Thoughtful Democrats in Congress and the Obama Administration privately warned about this "budgetary time bomb," as one staffer put it, but the Pelosi-Obama majority plowed ahead anyway. Health and Human Services Secretary Kathleen Sebelius felt obliged to shut down the program last fall because, by some miracle and unlike other entitlements, Class is legally required to be "actuarially sound." Ms. Sebelius conceded that this is impossible, as the critics claimed all along.

The Administration hasn't issued a formal statement on repeal, but it is informally opposing it—perhaps because the Democratic left wants to keep Class frozen in a cryogenic state to be revived when Democrats again control Congress. The Administration is thus opposing repeal of a program its own bureaucracy says can't work. Could there be a clearer illustration of Washington's refusal to face fiscal reality?

CBO estimates Class would cost about $81 billion over a decade, and in any other year it would have led to a major debate as a stand-alone bill. Class only seems like a pittance because it was folded into the much larger multitrillion-dollar ObamaCare package.

Compare it to the 1997 entitlement love child of Bill Clinton and Newt Gingrich—the state children's health insurance program—that will spend about $78 billion over the next 10 years. The Schip program was supposed to help poor kids but Democrats have expanded it well into the middle class so it is now crowding out private insurance; some 31% of all U.S. children are now on Schip or Medicaid. That was also the explicit political goal for Class and long-term care.

The conventional wisdom is that Class repeal is dead on Senate arrival, though a dozen Democrats voted to strip Class out of ObamaCare in December 2009. If Senate Republicans have any political wit, they'll declare all-out Class warfare and compel repeated floor votes. Either they'll get rid of it permanently or else force Democrats to defend the program that even they admit is indefensible.

If Congress can't strike a zombie entitlement that has no constituency, that now even the Administration says is unworkable, and that its own deficit commission recommended eliminating . . . well, what hope is there for reforming other entitlements?

Tis easy enough to see the plausibility of what you say, but as Ben Franklin exhorted us on Day One, it is up to us to defend the Republic.

The first step is actually articulating how to get to there from here.

I would note that there is also a thread on the forum here about "Cutting Goverment Spending" which remains quite important, but it tends to focus on discretionary spending at the conceptual cost of not noticing the entitlement issue as much as it should.

With this thread I seek to sharpen the point to exactly where all fear to go -- the specifics, including tactical and practical politics, of getting to there from here.

The Euros are further along the path than we. If/when they implode, much of the capital flight will come to the US. There are many things that will go well for us once our government ceases some of its many, many stupidities. Should Obama lose, which is possible, things like the Canadian pipeline to Texas will get built, natural gas will be allowed to happen (and what we have come to realize we have is IMHO a real game changer), etc etc.

We are blessed to be born in an amazing country. We survived the stupidities of FDR, the stupidities of Carter (the late 70s were really quite bad) and we have it in us to survive Baraq and the Burst Bubble. Yes, pretty much the meaning of America seems to hang in the balance today to an extent I have never seen, but , , , well , , , it is up to us.

The vast majority of the country is unprepared for making that hard choices that need to be made. Buraq and the state media will continue panem et circes to buy votes, as well as copious vote fraud to retain power.

It’s been more than 1,000 days since the Senate has passed a budget, but Senate Majority Leader Harry Reid is unconcerned. In fact, he says he has no plans to bring a budget to the floor in 2012, either. He argues the 2012 budget is already done because last summer’s debt-ceiling deal included a few spending caps. Essentially, Reid wonders: Why do we need a long-term spending plan when we can stumble into some spending caps here and there? The Hill was first to this story:

“We do not need to bring a budget to the floor this year — it’s done, we don’t need to do it,” Senate Majority Leader Harry Reid (D-Nev.) told reporters on Friday, echoing previous statements from his office.

Reid and Sen. Charles Schumer (D-N.Y.) argued that the debt-limit agreement in August directs spending for the next year and that Senate Appropriations Chairman Daniel Inouye (D-Hawaii) has already asked the heads of the subcommittees to write their bills for fiscal 2013.

Senate Budget Chairman Kent Conrad (D-N.D.) has said he would probably mark up a budget resolution this year to appease ranking member Jeff Sessions (R-Ala.), but Reid said he didn’t expect any floor action on any measure produced by the panel. …

Schumer said it is a “total falsity” for Republicans to say that Democrats haven’t passed the budget: “we passed it on Aug. 2.”

“They’re attacking us because they have nothing better to do,” Reid said. “They need something else to talk about.”

If what Reid and Schumer are arguing is that the Senate doesn’t need to pass a formal budget resolution to enable the government to spend taxpayer money irresponsibly, then they’re right. For the past couple years, while the Senate Budget Democrats have sat on their hands, failing to submit a budget resolution to the full Senate, the Senate Appropriations Committee has still authorized ungodly amounts of discretionary spending.

But if what Reid and Schumer are saying is that they’ve followed the law and submitted a budget resolution, then they’re flat-out wrong. The Congressional Budget Act requires the president to submit a budget to Congress by Feb. 1 every year. The Senate Budget Committee is to report a budget resolution to the full Senate by April 1. The House and Senate are to reach agreement on a concurrent budget resolution by April 15. Senate Budget Democrats haven’t submitted a budget since 2009.

Here’s why it matters: The Appropriations Committee determines levels of discretionary spending. Approps don’t touch mandatory spending. But mandatory spending constitutes about 60 percent of all federal spending — and mandatory programs like Medicare, Medicaid and Social Security drive our deficits and debt. Without the imposition of budget discipline, these programs grow on autopilot.

By never submitting a budget, enacting a few discretionary spending caps as a part of the Budget Control Act (a.k.a. the debt ceiling deal) and punting to the Super Committee that also punted on entitlement reform, Democrats avoid any difficult discussion of how to ensure the solvency of our entitlement programs. With no plan of their own on the table, they’re free to shoot down anything Republicans propose.

It’s no secret why no one wants to touch entitlements — but it is still the shame of Washington that nobody will.

That’s Rick Santorum talking about the American welfare state. But who, really, is hooked—and how does that matter politically?

Yesterday’s New York Times featured a long, meaty article on the distribution of federal benefits. One of the more striking points, drawing on work by political scientist Dean Lacy, is that government benefits constitute a larger share of total income in “red” states than in “blue” states. (The Times article includes a lovely set of interactive maps detailing the geographical distribution of benefits from a variety of specific programs such as Medicare and unemployment compensation; here is the 2009 map of total benefits.)

A friend asks, “Is this true at the individual level? It isn’t, right?”

I imagine that the answer to that question depends a lot on what gets counted as government benefits (tax credits? grants and contracts?) and whether we are talking about gross benefits, benefits minus taxes, or benefits as a share of total income. As Monkey Cagers know (see here, here, and here), political scientist Suzanne Mettler’s book, The Submerged State, includes some excellent analysis of the tenuous relationship between objective and subjective dependency on the federal government.

In a review (forthcoming in Democracy) of political journalist Thomas Edsall’s new book, The Age of Austerity, I raise the question of how Republican policy-makers bent on budget-cutting will come to grips with the actual distribution of government spending:

In a perceptive recent essay in New York magazine, heterodox Republican David Frum sketched a political landscape much like the one portrayed by Edsall. “We have entered an era in which politics increasingly revolves around the ugly question of who will bear how much pain,” Frum wrote. “Conservative constituencies already see themselves as aggrieved victims of American government: They are the people who pay the taxes even as their ‘earned’ benefits are siphoned off to provide welfare for the undeserving.”

However, Frum went on to pinpoint the fundamental contradiction in this conservative worldview. “The reality,” he wrote, is that “the big winners in the American fiscal system are the rich, the old, the rural, and veterans—typically conservative constituencies.” Squeezing the programs conservatives hate won’t bring in much revenue, so balancing the budget would require chopping into programs most conservatives support—including defense, Medicare, Social Security, and middle-class tax breaks.

In Chain Reaction, Edsall recognized that “the anti-tax, anti-government view of the electorate … was directed at programs serving heavily minority and poor populations,” while spending on education, health, Social Security, crime control, and environmental protection “retained unstinting, and in some cases growing, majority support.” That remains true 20 years later; even most conservatives oppose cuts in most major government programs, and they do so even when they are reminded of the perils of deficit spending.

Unfortunately for Republicans—and for Edsall’s analysis of the politics of austerity—“programs serving heavily minority and poor populations” are not where the money is. According to the Census Bureau’s Consolidated Federal Funds Report, less than 8 percent of federal spending in 2010 was for unemployment benefits, food stamps, housing assistance, student aid, and the earned-income tax credit. Almost half was for salaries and wages, grants, and procurement; most of the rest consisted of Social Security and Medicare payments. Large-scale reductions in government spending would require significant cuts in big-ticket programs that mostly benefit the middle class. The political challenge facing budget-cutting Republicans is exacerbated by the fact that beneficiaries of government spending are disproportionately concentrated in red states. Federal expenditures made up almost 30 percent of total personal income in the 29 states that voted for John McCain, a significantly higher dependency level than in the states that voted for Barack Obama.

“The rank and file of the GOP,” Frum concluded, are “caught between their interests and their ideology.” This clash of interests and ideology is left largely unexplored in Edsall’s analysis. While he acknowledges that “substantial numbers of Republican voters have no appetite for cuts in the two programs that virtually every economist and budget analyst says must be chopped down to size: Medicare and Social Security,” he never really comes to grips with the question of how Republican politicians will finesse that fact. It is one thing to carp about the futility and injustice of government programs in the abstract, but something else to deprive voters of their concrete benefits.

LINDSTROM, Minn. — Ki Gulbranson owns a logo apparel shop, deals in jewelry on the side and referees youth soccer games. He makes about $39,000 a year and wants you to know that he does not need any help from the federal government. Where Americans Most Depend on Government Benefits Interactive Feature More Americans Relying on Government Benefits Interactive Feature New York Times/CBS Poll on Entitlements“I don't demand that the government does this for me. I don't feel like I need the government,” said KI GULBRANSON, who counts on an earned-income tax credit and has signed up his children for free meals at school.

He says that too many Americans lean on taxpayers rather than living within their means. He supports politicians who promise to cut government spending. In 2010, he printed T-shirts for the Tea Party campaign of a neighbor, Chip Cravaack, who ousted this region’s long-serving Democratic congressman. Yet this year, as in each of the past three years, Mr. Gulbranson, 57, is counting on a payment of several thousand dollars from the federal government, a subsidy for working families called the earned-income tax credit. He has signed up his three school-age children to eat free breakfast and lunch at federal expense. And Medicare paid for his mother, 88, to have hip surgery twice. There is little poverty here in Chisago County, northeast of Minneapolis, where cheap housing for commuters is gradually replacing farmland. But Mr. Gulbranson and many other residents who describe themselves as self-sufficient members of the American middle class and as opponents of government largess are drawing more deeply on that government with each passing year. Dozens of benefits programs provided an average of $6,583 for each man, woman and child in the county in 2009, a 69 percent increase from 2000 after adjusting for inflation. In Chisago, and across the nation, the government now provides almost $1 in benefits for every $4 in other income. Older people get most of the benefits, primarily through Social Security and Medicare, but aid for the rest of the population has increased about as quickly through programs for the disabled, the unemployed, veterans and children. The government safety net was created to keep Americans from abject poverty, but the poorest households no longer receive a majority of government benefits. A secondary mission has gradually become primary: maintaining the middle class from childhood through retirement. The share of benefits flowing to the least affluent households, the bottom fifth, has declined from 54 percent in 1979 to 36 percent in 2007, according to a Congressional Budget Office analysis published last year. And as more middle-class families like the Gulbransons land in the safety net in Chisago and similar communities, anger at the government has increased alongside. Many people say they are angry because the government is wasting money and giving money to people who do not deserve it. But more than that, they say they want to reduce the role of government in their own lives. They are frustrated that they need help, feel guilty for taking it and resent the government for providing it. They say they want less help for themselves; less help in caring for relatives; less assistance when they reach old age. The expansion of government benefits has become an issue in the presidential campaign. Rick Santorum, who won 57 percent of the vote in Chisago County in the Republican presidential caucuses last week, has warned of “the narcotic of government dependency.” Newt Gingrich has compared the safety net to a spider web. Mitt Romney has said the nation must choose between an “entitlement society” and an “opportunity society.” All the candidates, including Ron Paul, have promised to cut spending and further reduce taxes. The problem by now is familiar to most. Politicians have expanded the safety net without a commensurate increase in revenues, a primary reason for the government’s annual deficits and mushrooming debt. In 2000, federal and state governments spent about 37 cents on the safety net from every dollar they collected in revenue, according to a New York Times analysis. A decade later, after one Medicare expansion, two recessions and three rounds of tax cuts, spending on the safety net consumed nearly 66 cents of every dollar of revenue. The recent recession increased dependence on government, and stronger economic growth would reduce demand for programs like unemployment benefits. But the long-term trend is clear. Over the next 25 years, as the population ages and medical costs climb, the budget office projects that benefits programs will grow faster than any other part of government, driving the federal debt to dangerous heights. Americans are divided about the way forward. Seventy percent of respondents to a recent New York Times poll said the government should raise taxes. Fifty-six percent supported cuts in Medicare and Social Security. Forty-four percent favored both. Support for spending cuts runs strong in Chisago, where anger at the government helped fuel Mr. Cravaack’s upset victory in 2010 over James L. Oberstar, the Democrat who had represented northeast Minnesota for 36 years. Enlarge This Image

Jenn Ackerman/The New York Times“Most of the seniors around here are struggling to make it,” said BARBARA SULLIVAN, who lives on Social Security and relied on Medicare to pay for an operation. Multimedia

The Debt FixThe Debt FixCLOSE VIDEOSee More Videos » Interactive Map The Geography of Government Benefits Graphic Reliance on the Safety Net Rises Interactive Feature New York Times/CBS Poll on Entitlements

“They're getting $300 or $400 tattoos, and they're wearing nice new Nike shoes that I can't afford," said BRIAN QUALLEY, who says some of his tattoo customers pay with money from disability checks.

“Spending like this is simply unsustainable, and it’s time to cut up Washington, D.C.’s credit card,” Mr. Cravaack said in a February speech to the Hibbing Area Chamber of Commerce. “It may hurt now, but it will be absolutely deadly for the next generation — that’s our children and our grandchildren.” But the reality of life here is that Mr. Gulbranson and many of his neighbors continue to take as much help from the government as they can get. When pressed to choose between paying more and taking less, many people interviewed here hemmed and hawed and said they could not decide. Some were reduced to tears. It is much easier to promise future restraint than to deny present needs. “How do you tell someone that you deserve to have heart surgery and you can’t?” Mr. Gulbranson said. He paused. “You have to help and have compassion as a people, because otherwise you have no society, but financially you can’t destroy yourself. And that is what we’re doing.” He paused again, unable to resolve the dilemma. “I feel bad for my children.” Middle-Class Blues Mr. Gulbranson has tried several ways to make a living in the storefront he bought from his father in 1979. He ran a gift shop, then shifted to selling jewelry. Nine years ago, he moved the gold scales to the back and bought equipment for screen-printing clothing. Through it all, he has never made more than about $46,000 in a year. Meanwhile, the cost of life — and of raising five children — has climbed inexorably. “I used to go out and try to have a meal at Perkins, which is a restaurant here, and get out of the store with $5,” Mr. Gulbranson said. “And now it’s probably up to $10.” In recent years he has earned so little that he did not pay federal income taxes, although he still paid thousands of dollars toward Medicare and Social Security. The earned-income tax credit is intended to offset those payroll taxes, to encourage people with lower-paying jobs to remain in the work force. Mr. Gulbranson said the money covered the fees for his children’s sports leagues and the cost of keeping the older ones on the family’s car insurance. “If we didn’t get these government things, then probably my kids could not participate in some of the sports they do,” he said. Almost half of all Americans lived in households that received government benefits in 2010, according to the Census Bureau. The share climbed from 37.7 percent in 1998 to 44.5 percent in 2006, before the recession, to 48.5 percent in 2010. The trend reflects the expansion of the safety net. When the earned-income credit was introduced in 1975, eligibility was limited to households making the current equivalent of up to $26,997. In 2010, it was available to families making up to $49,317. The maximum payout, meanwhile, quadrupled on an inflation-adjusted basis. It also reflects the deterioration of the middle class. Chisago boomed and prospered for decades as working families packed new subdivisions along Interstate 35, which runs up the western edge of the county like a flagpole with its base set firmly in Minneapolis. But recent years have been leaner. Per capita income in Chisago excluding government aid fell 6 percent on an inflation-adjusted basis between 2000 and 2007. Over the next two years, it fell an additional 7 percent. Nationally, per capita income excluding government benefits fell by 3 percent over the same 10 years. Mr. Gulbranson’s business struggled as other companies, particularly construction firms, stopped ordering logo-emblazoned shirts. In 2009, the family claimed the earned-income credit for the first time on the advice of their accountant, who was claiming it for herself. The share of local families claiming the credit climbed 33 percent between 2000 and 2008, the most recent year for which data are available. To make extra money, Mr. Gulbranson refereed 40 soccer games on Tuesday and Thursday nights last fall. His wife sold clothes at equestrian events and air-brushed novelties at craft fairs, driving around the country with a one-ton trailer hitched to a 20-foot van. Enlarge This Image

Clint Austin/Duluth News Tribune, via Associated PressChip Cravaack during his campaign for Congress in 2010. Mr. Cravaack says he entered politics to lift the burden of debt from his two sons. Voter anger over spending helped him oust an incumbent. Interactive Feature New York Times/CBS Poll on Entitlements

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Their difficulties, Mr. Gulbranson said, have made it hard to imagine asking anyone to pay higher taxes. “I don’t think most people could bear to pay more,” he said. Instead, he said he would rather give up the earned-income credit the family now receives and start paying for school lunches for his children. “I don’t demand that the government does this for me,” he said. “I don’t feel like I need the government.” How about Social Security? And Medicare? Can he imagine retiring without government help? “I don’t think so,” he said. “No. I don’t know. Not the way we expect to live as Americans.” A Starring Role Bob Kopka and his wife often drive to the American Legion hall in North Branch on Thursday nights, joining the crowd gathered in the basement bar for the weekly meat raffle. Almost everyone present relies on the government to pay for their medical care. Mr. Kopka, 74, has had three heart procedures in recent years. His wife recently had surgery to remove cataracts from both eyes. Without Medicare, Mr. Kopka said, the couple could not have paid for the treatments. “Hell, no,” he said. “No. Never. She would have to go blind.” And him? “I’d die.” Few federal programs are more popular than Medicare, which along with Social Security assures a minimum quality of life for older Americans. None are more central to the nation’s financial problems. The Congressional Budget Office projects that government spending on medical benefits, even taking into account the cost containment measures in the 2010 health care law, will rise 60 percent over the next decade. Then it will start rising even more quickly. The cost of caring for each beneficiary continues to increase, and the government projects that Medicare enrollment will grow by roughly one-third as baby boomers enter old age. Spending on medical benefits will account for a larger share of the projected increase in the federal budget over the next decade than any other kind of spending except interest payments on the federal debt. Medicare’s starring role in the nation’s financial problems is not well understood. Only 22 percent of respondents to the New York Times poll correctly identified Medicare as the fastest-growing benefits program. A greater number of respondents, 27 percent, chose programs for the poor. That category, which includes Medicaid, is slightly larger than Medicare today but is projected to add only half as much to federal spending over the next decade. Medicare’s financial problems are much worse than Social Security’s. A worker earning average wages still pays enough in Social Security taxes to cover the benefits the worker is likely to receive in retirement, according to an analysis by the Urban Institute. Social Security is still running out of money because the program must also support spouses who do not work and workers who earn lower wages. But Medicare’s situation is even more dire because a worker earning average wages still contributes only $1 in Medicare taxes for every $3 in benefits likely to be received in retirement. A woman who was 45 in 2010, earning $43,500 a year, will pay taxes that will reach a value of $87,000 by the time she retires, assuming the money is invested at an annual interest rate 2 percentage points above inflation, according to the Urban Institute analysis. But on average, the government will then spend $275,000 on her medical care. The average is somewhat lower for men, because women live longer. Medicare is often described as an insurance program, but its premiums are not nearly high enough. In simple terms, Americans are getting more than they pay for. But many older residents in Chisago say this problem belongs to younger generations. They paid what they were told; they want to collect what they were promised. Some, like the Kopkas, have savings they can tap. Mr. Kopka still owns the landscaping business he started after leaving the Navy in the early 1960s. He and his wife own a three-bedroom home on three acres, valued by the county at $153,700. The mortgage is paid. They hope to pass the house to their children. Others have nothing else. Barbara Sullivan, 71, moved last year to the apartments above the Chisago County Senior Center in North Branch. Waiting on a recent Friday for the hot lunch, which costs $3.50, she watched roughly 20 people play bingo for prizes including canned soup and Chef Boyardee pasta. Enlarge This Image

“Most of the seniors around here are struggling to make it,” she said. She counts herself among them. She lives on $1,220 a month in Social Security benefits and relied on Medicare to pay for an operation in November. She believes that she is taking more from the government than she paid in taxes. She worries about the consequences for her grandchildren. She said she would like politicians to propose solutions. “We’re reasonable people,” she said. “We’re not going to say, ‘Give it to me and let my grandchildren suffer.’ I think they underestimate seniors when they think that way.” But she cannot imagine asking people to pay higher taxes. And as she considered making do with less, she started to cry. “Without it, I’m not sure how I would live,” she said. “With the check I’m getting from Social Security, it’s a constant struggle on making sure that I pay my rent and have enough left for groceries. “I haven’t bought a Christmas present, I haven’t bought clothing in the last five years, simply because I can’t afford it.” Keeping a Promise Representative Cravaack often says he entered politics to lift the burden of debt from the shoulders of his two sons. “I vision that I open up their backpacks and I put in a 50-pound rock and zip it back up again,” Mr. Cravaack told the Minnesota Freedom Council in October 2010. “And I say, ‘Sorry, son, you’re going to have to hump this the rest of your life.’ Because that’s exactly what we’re doing to our national debt right now to our children.” Mr. Cravaack, a 53-year-old Navy veteran and a retired pilot for Northwest Airlines, was grounded by sleep apnea in 2007. He and his wife, an executive at the drug company Novo Nordisk, decided he would stay home with their sons. He soon became the first man to serve as president of the Chisago Lakes Parent Teacher Organization. In August 2009, while driving the children to North Branch, he heard a talk radio host urging people to protest President Obama’s health care legislation. Mr. Cravaack and about two dozen others spent more than two hours the next day in Mr. Oberstar’s North Branch office before a staff member told them the congressman would not meet them. The rejection convinced Mr. Cravaack that Mr. Oberstar should be replaced. One of the other protesters, a woman who had taken her six children to the office, became Mr. Cravaack’s campaign scheduler. Two weeks after speaking to the Freedom Council, he beat Mr. Oberstar by 1.6 percentage points, or 4,407 votes. Voters in Chisago, the southern tip of an expansive district, provided the margin of victory. “We have to break away,” Mr. Cravaack told supporters, “from relying on government to provide all the answers.” Mr. Cravaack has said he drew unemployment benefits during a furlough from Northwest in the early 1990s. He did not respond to several requests for an interview, nor to an e-mail with questions about his views and about whether his family has drawn on other benefits programs. This account is based on a review of his public statements. Shortly after arriving in Congress, Mr. Cravaack voted with a vast majority of House Republicans for a plan to remake Medicare by providing money to its beneficiaries to buy private insurance. Senate Democrats have rejected that plan. But Mr. Cravaack has also consistently said the government should not reduce its largest category of spending — benefits for the current generation of retirees. He also says he does not support cuts for people who will turn 65 over the next decade. “If you’re 55 years and older, you don’t have to listen to this conversation because we have to keep those promises,” Mr. Cravaack told The Daily Caller last April. “People like myself, 52, if you’re 54 or younger, we’re going to have a conversation.” Tomorrow, Tomorrow The government helps Matt Falk and his wife care for their disabled 14-year-old daughter. It pays for extra assistance at school and for trained attendants to stay with her at home while they work. It pays much of the cost of her regular visits to the hospital.

Mr. Falk, 42, would like the government to do less. “She doesn’t need some of the stuff that we’re doing for her,” said Mr. Falk, who owns a heating and air-conditioning business in North Branch. “I don’t think it’s a bad thing if society can afford it, but given the situation that our society is facing, we just have to say that we can’t offer as much resources at school or that we need to pay a higher premium” for her medical care. Mr. Falk, who voted for Mr. Cravaack, said he did not want to pay higher taxes and did not want the government to impose higher taxes on anyone else. He said that his family appreciated the government’s help and that living with less would be painful for them and many other families. But he said the government could not continue to operate on borrowed money. “They’re going to have to reduce benefits,” he said. “We’re going to have to accept it, and we’re going to have to suffer.” One of the oldest criticisms of democracy is that the people will inevitably drain the treasury by demanding more spending than taxes. The theory is that citizens who get more than they pay for will vote for politicians who promise to increase spending. But Dean P. Lacy, a professor of political science at Dartmouth College, has identified a twist on that theme in American politics over the last generation. Support for Republican candidates, who generally promise to cut government spending, has increased since 1980 in states where the federal government spends more than it collects. The greater the dependence, the greater the support for Republican candidates. Conversely, states that pay more in taxes than they receive in benefits tend to support Democratic candidates. And Professor Lacy found that the pattern could not be explained by demographics or social issues. Chisago has shifted over 30 years from dependably Democratic to reliably Republican. Support for the Republican presidential candidate has increased relative to the national vote in each election since 1984. Senator John McCain won 55 percent of the vote here in 2008. Residents say social issues play a role, but in recent years concerns about spending and taxes have predominated. Voters in the North Branch school district have rejected increased financing for local schools in each of the past three years. In 2010, the district switched to a four-day school week, striking Monday from the calendar to save money. Some of the fiercest advocates for spending cuts have drawn public benefits. Many, like Mr. Falk, have family members who rely on the government. They often cite that personal experience as the reason they want to cut government spending. Brian Qualley, 49, has a sister who survived a brain tumor but was disabled by its removal. The government pays for her care at an assisted-living facility. Their mother scrapes by on Social Security. Mr. Qualley said that the government should provide for those who need help, but that too much money was being wasted. Mr. Qualley, who owns a tattoo parlor in Harris, north of North Branch, said some of his customers paid with money from government disability checks. “They’re getting $300 or $400 tattoos, and they’re wearing nice new Nike shoes that I can’t afford,” he said, looking up from working a complicated design into the left leg of a middle-aged woman. “I guess I shouldn’t say it because it’s my business, but I think a tattoo is a little too extravagant.” But Mr. Qualley said he did not want to reduce benefits for the current generation of retirees. Rather, he said his own generation should get less, because they have time to prepare. This is a common position among the young and healthy in Chisago. Mr. Qualley said he was saving some money for retirement, although, he added, “I don’t have a 401(k) or anything like that.” “I also have a job that I don’t necessarily ever want to — or have to — retire from,” he said. What if his hands start to shake as he gets older? “Actually,” he said, the electric needle falling silent in his hand, “it’s my shoulders and neck that bother me most.” Safety in Numbers Barbara Nelson has little patience for people who say they will not need government help. She considers herself lucky she has not, and obligated to provide for those who do. “Catastrophes happen in life,” she said, sitting in a coffee shop in Taylors Falls. “To be so arrogant that you think it won’t happen to you, that somehow you’re going to be one of the special ones, I disagree with that.”

Ms. Nelson, 61, who describes herself as a centrist Democrat, also dismisses the claim that people cannot afford to pay more taxes. “Anyone who can come into a coffee shop and buy coffee is capable of paying more,” she said. “If someone’s life can be granted, in terms of adequate health care, if that means I give up five cups of coffee a month, that is a small price to pay.” Gordy Peterson, 62, who has used a wheelchair for 30 years since a construction accident, has reluctantly reached a similar conclusion. “I’m a conservative,” he said by way of introducing himself. He built his own house before his injury and paid for it in cash. He still thinks the government should operate that way. He never intended to depend on federal aid and said he sometimes felt guilty about it. But for the last three decades, he has received a regular check from the Social Security disability insurance program, and Medicare has helped to pay his medical bills. “Here I’m getting money, and everybody is struggling,” he said. “Even though it ain’t no cakewalk for me.” Mr. Peterson used a workers’ compensation settlement to buy a farm that he managed with his brother-in-law, who is mentally handicapped and also on government disability. “He was my legs, and we worked it,” Mr. Peterson said. They grew corn, soybeans and rye, and even kept steers for a while. In good years they earned enough to live on. In bad years they lived on the government’s checks. Life would have been very difficult without them, he said. Mr. Peterson, an easygoing man who looks down when he thinks and smiles sheepishly when he offers an opinion, looked down after completing the story of his own dependence on the safety net. “It’s hard to beat up on the government when they’ve been so good to you,” he finally said. “I’ve never really thought about it, I guess.” Lately, the government has been very good, indeed. The county, with federal financing, bought a corner of Mr. Peterson’s farm to build a new interchange for Interstate 35. He used the money to open a gas station at the edge of the farm in 2008 to serve the traffic that rolls off the new ramp. The business is prospering, and he no longer worries that he will need to depend on Social Security. “But you can’t take that away,” he said. “My own sister has only Social Security. That’s all. That’s all she’s going to have. And if you take that away from her, Christ, she’d be a street person. I don’t think we can cut them off on that.” How about higher taxes? Maybe a little higher, he said. Maybe. “I’m glad I’m not a politician,” he said. “We’re all going to complain no matter what they do. Nobody wants to put a noose around their own neck.”

The vast majority of the country is unprepared for making that hard choices that need to be made. Buraq and the state media will continue panem et circes to buy votes, as well as copious vote fraud to retain power.

Someone on talk radio was questioning the motive of Brockster NOT addressing the entitlements.

Whether it be he is just waiting to get re-elected?

And he is playing chicken and letting the Repubs make the first step into the quandry and then will mow down all their proposals with demogauguery?

Or is he really the manchurain liberal who does want the system to collapse so it can be rebuilt more like a communist or fascist state with the end goal being one world government that is all controlling or all knowing.

The answer to this question is unknown but I think it very reasonable to suspect it actually is that he would be ok if the system collapse as long as he and his liberal friends can progress to even bigger new liberal world orders.

Some fools would call this crazy, far fetched, propaganda.

There is actually a LOT of evidence this IS real to support this theory. Indeed many of the big libs today are saying as much.

The foreign policy proposals calling for the US to forever be bound by the UN is just one example.

The idea tha offshore drilling should be taxed to give to poor countries - now I should work to pay off the benefits to those in the US who are bribed to vote AND I should do the same for the entire world?

If this does not shine a light on what the liberals are doing to us - I don't know what will wake up America.

"The idea that a crash will then usher in a marxist system will not play out as the left hopes." - Seems like it worked last time...-----------Good to see the NY Times sending a foreign correspondent out to the heartland for a story with all their own cutbacks. The Rep. mentioned in the story, Chip Cravaack, is unfortunately one of the seats from 2010 that R's will lose this year. The story misses the fact that life is expensive for the seniors on fixed income and for the hard working shop owner because of embedded taxes and regulations unmeasurable on their tax return. His customers would have more to spend if they weren't working only to pay some kind of government burden during Jan-Aug months of the year. To turn down the EIC, school lunch or a college subsidy is like the Obamites said about the super PAC - to disarm unilaterally. You may oppose the programs but you lost that argument and are already paying for them - and getting back only 0.70 on the dollar even if you do surrender your principles.--------Important points are brought up in the bigdog post.

First is that I draw a distinction a conservative and an elected Republican: "Why is it hard for conservatives to cut entitlements? It may be because it isn't in their own self interest". A conservative would not flinch at that, but also would never be elected or re-elected. So we whine about people like Santorum of PA, about as conservative as they get, yet voted for steel subsidies and against freedom to trade. He still eventually lost by 17 points after all the pandering to the electorate and reaching to the middle.

Still there are flaws in measurement. Washington DC is the district LEAST dependent on the federal government for revenues? Good grief.

Not all expenditures are equal. Defense would seem to be a federal function while some of us argue that other functions are not.

My blue state MN is listed as receiving back 72 cents on the dollar and for that our bluest Senator Amy Klobuchar (Al Franken is to her right) comes into reelection with a 60% approval rate. During her 6 years in Washington the nation lost 5 million jobs, borrowed $6 trillion, her state sends a river of money to support failure and the people love her. Go figure. At 72 cents on the dollar, civil war or secession might be a more reasonable reaction than reelection based on the status quo.

A more apt question (IMO) than the one posed for Republicans is why do Democrats (and independents) accept the status quo. Republicans I think would make sweeping reforms if they could get the support they need from the people.

The reform if it ever happens needs to be bold and comprehensive. You do not end ethanol subsidies with the support of Iowans without a package that ends all similarly stupid and unconstitutional (equal protection under the law?) subsidies. You do not eliminate the mortgage deduction without reform of the rest of the tax code. In fact you will not likely reform taxes ever again when 51% of voters believe they are receiving goodies and paying nothing.

Someone with a backbone needs to step forward and point out that directing more and more resources out of the productive economy, whether it is directly charged to you or not, is a tax on your economy, a tax on your children and a tax on all of your out of work neighbors and relatives. At some point with everyone else riding, there is no incentive for anyone to pull the wagon. The load is just too heavy.

It was said about Japan in about 1990 that the only thing that could get the economy going again was bold reform, and that the one thing for sure their political system was incapable of was bold reform. History proved that to be right.

Once we get back to about 2.5% sustained growth (where breakeven 'growth' is about 3.1%) and we are only shedding say a half million jobs per year instead of 1.2 million in one month, then the opportunity to make truly comprehensive, definitional reform of government spending and taxes will have passed, and stagnation and gradual decay will be our future.

At the end of the big spending Republican congress in Nov 2006 this country needed a sharp turn toward transformational change; we just turned the wrong direction.

Four years later the message from the early tea party movement was clearly cut spending first and shrink the size and scope of government. That movement resulted in a pretty strong and difficult to repeat election result in 2010, which resulted in a 5% annual increase in spending, after all the shutdown/debt limit hysteria, and that was above and beyond the 'temporary', 'emergency levels' of the previous years!

It is hard to take the polling of today (or the candidates that we have) and be optimistic about real change.

Just the single fact that I keep hearing that Republicans should be able to "hold on" to the House of reps is alone enough to dishearten me.

To think we have this gigantic liberal in the WH and we are facing this truly radical transformation of America and yet Republicans are struggling to hold onto gains....

The fact the Brock has an approval of even 40-50% also tells me it is almost too late.

It appears many in this country are just fine with a more socialist state.

The 15 - 20% or whatever the number is in the middle - who always decide the elections on a national levelit is obvious by now they are not swayed or concerned about ideology one way or the other. They just get it, care, understand, see it or whatever, they only care about their pocketbook.

That is it. It has to be that. Otherwise Brock's approval would be 40% with disapproval of 60%. We wouldn't even be thinking the House could go back to Dems or lose Repub seats. It would be a landslide.

"The idea that a crash will then usher in a marxist system will not play out as the left hopes." - Seems like it worked last time...

The dollar wasn't destroyed in the great depression and the USG wasn't drowning in an ocean of red ink back then.

Good points for the depression, though disastrous government policies led to a big expansion of disastrous government policies then too. I was trying to refer to the (mini?)crash of 2008. Their CRAp policies and RINO/Dem currency expansion led to crash and panic that led to bigger and bigger government including movement toward the Marxist dream of public ownership of the means of production.

I think CCP has this right except that it is no significance whether or not their destruction of the economy is intentional. I think the bumbling C-student(?) Marxist didn't really know that promising to raise taxes, accelerating the rule by regulators, nationalizing industries, massively increasing the portion of resources consumed by the public sector and doubling the cost of energy on the private sector (until it doubles again) would actually hurt economic growth and employment. He thought IMO that he would have the Reagan recovery at this point and win 49 states by doing exactly the opposite.

I really don't know Crafty. I think the Repubs have been running a defensive retreating strategy for years. They are really afraid of losing segments of the voters if they stand on principle too much. So they try to compromise which backfires and on and on.

It is nearly impossible to compete with a party that steals from producers and bribes more and more voters.

Now we have the medicare soc sec bunch who are more inclined to be on the right but for their own pockets are suddenly another big entitlement group that will protect its interests over the good of the country. Like all of us I guess or hate to say.

"no significance whether or not their destruction of the economy is intentional"

It may be more incompetence. Does Paul Krugman continue to shove his absurd views on us because he really believes his way is best or that if it doesn't work - well hell F the US anyway and start over? I am not sure about this.

As we all here know the liberal movement is with the end game of the US is nothing more then a piece of land in a world ruled by liberals "governmentalists".

They don't like America they want to abolish its dominance or use it only to spread around the world. So if this country fold as we know it - maybe not so bad.

(Of course until they personally would suffer but that is another story.)

I certainly disagree with some of this piece (e.g. taxing cap gains at ordinary rates-- CGs capture inflation, accumulate over years, but realize in one moment, and entail the risk of capital, etc) but there is much here of interest as well.

Stan Druckenmiller makes an unlikely class warrior. He's a member of the 1%—make that the 0.001%—one of the most successful money managers of all time, and 60 years old to boot. But lately he has been touring college campuses promoting a message of income redistribution you don't hear out of Washington. It's how federal entitlements like Medicare and Social Security are letting Mr. Druckenmiller's generation rip off all those doting Barack Obama voters in Generation X, Y and Z.

"I have been shocked at the reception. I had planned to only visit Bowdoin, " his alma mater in Maine, he says. But he has since been invited to multiple campuses, and even the kids at Stanford and Berkeley have welcomed his theme of generational theft. Harlem Children's Zone President Geoffrey Canada and former Federal Reserve Governor Kevin Warsh have joined him at stops along the tour.

Mr. Druckenmiller describes the reaction of students: "The biggest question I got was, 'How do we start a movement?' And my answer was 'I'm a 60-year-old washed-up money manager. I don't know how to start a movement. That's your job. But we did it in Vietnam without Twitter and without Facebook and without any social media. That's your job.' But the enthusiasm—they get it."

Even at Berkeley, he says, "they got it. There is tremendous energy in the room and of course they understand it. I'd say it's a combination of appalled but motivated. That's the response I've been getting, and it's been overwhelming."

Movement or no, this is a good week to check in with Mr. Druckenmiller, as President Obama won the budget battle without policy concessions to break the federal debt limit and continue borrowing beyond $17 trillion. I last spoke to the Pittsburgh native and father of three daughters during the 2011 debt-limit brawl, and he created a stir by supporting entitlement changes as a condition of raising the debt cap.

This was not the Wall Street consensus. He also said that a "technical default," in which the government is a week or two late in making payments on its debt, would be "horrible" but not "the end of the world" if it produced reforms that put U.S. finances on a sounder footing.

"Some characters in the administration have mischaracterized my view," he says now, in the conference room of his office high above midtown Manhattan. Then as now, he argues that major reform to protect future generations would be worth a short period of market turbulence.

"If there's something really big on the other side in terms of entitlement reform, it's worth using the debt limit. And God forbid even if you go a day or two over it in terms of interest payments," he says, the country would be better off "if and only if you got big, big progress on a long-term problem." Contemplating the recent Beltway debacle, he adds, "the problem with what we just went through is there was no big thing on the other side."

Not that Mr. Druckenmiller endorsed the most recent Republican strategy. "I thought tying ObamaCare to the debt ceiling was nutty," he says, and I can confirm that he was saying so for weeks before the denouement.

But he adds that "I did not think it would be nutty to tie entitlements to the debt ceiling because there's a massive long-term problem. And this president, despite what he says, has shown time and time again that he needs a gun at his head to negotiate in good faith. All this talk about, 'I won't negotiate with a gun at my head.' OK, you've been president for five years."

His voice rising now, Mr. Druckenmiller pounds his fist on the conference table. "Show me, President Obama, when the period was when you initiated budget discussions without a gun at your head."

Which brings him back to his thieving generation. For three decades until 2010, Mr. Druckenmiller ran the hedge fund he founded, Duquesne Capital. Now retired from managing other people's money, he looks after his own assets, which Forbes magazine recently estimated at $2.9 billion. And he wonders why in five years the massively indebted U.S. government will begin sending him a Social Security check for $3,500 each month. Because he earned it?

"I didn't earn it," he responds, while pointing to a bar chart that is part of his college presentation. Drawing on research by Boston University economist Laurence Kotlikoff, it shows the generational wealth transfer that benefits oldsters at the expense of the young.

While many seniors believe they are simply drawing out the "savings" they were forced to deposit into Social Security and Medicare, they are actually drawing out much more, especially relative to later generations. That's because politicians have voted to award the seniors ever more generous benefits. As a result, while today's 65-year-olds will receive on average net lifetime benefits of $327,400, children born now will suffer net lifetime losses of $420,600 as they struggle to pay the bills of aging Americans.

One of the great ironies of the Obama presidency is that it has been a disaster for the young people who form the core of his political coalition. High unemployment is paired with exploding debt that they will have to finance whenever they eventually find jobs.

Are the kids finally figuring out that the Obama economy is a lousy deal for them? "No, I don't sense that," says Mr. Druckenmiller, who is a registered independent. "But one of my points is neither party should own your vote. And once they know they own your vote, you're not going to get any action on this particular issue."

When the former money manager visited Stanford University, the audience included older folks as well as students. Some of the oldsters questioned why many of his dire forecasts assume that federal tax collections will stay at their traditional 18.5% of GDP. They asked why taxes should not rise to fulfill the promises already made.

Mr. Druckenmiller's response: "Oh, so you've paid 18.5% for your 40 years and now you want the next generation of workers to pay 30% to finance your largess?" He added that if 18.5% was "so immoral, why don't you give back some of your ill-gotten gains of the last 40 years?"

He has a similar argument for those on the left who say entitlements can be fixed with an eventual increase in payroll taxes. "Oh, I see," he says. "So I get to pay a 12% payroll tax now until I'm 65 and then I don't pay. But the next generation—instead of me paying 15% or having my benefits slightly reduced—they're going to pay 17% in 2033. That's why we're waiting—so we can shift even more to the future than to now?"

He also rejects the "rat through the python theory," which holds that the fiscal disaster will only be temporary while the baby-boom generation moves through the benefit pipeline and then entitlement costs will become bearable. By then, he says, "you have so much debt on the books that it's too late."

Unfortunately for taxpayers, "the debt accumulates while the rat's going through the python," so by the 2040s the debt itself and its gargantuan interest payments become bigger problems than entitlements. He points to a chart that shows how America's debt-to-GDP ratio, the amount of debt compared with national income, explodes in about 20 years. That's where Greece was when it hit the skids, he says, pointing to about 2030.

Breaking again with many Wall Streeters but consistent with his theme, Mr. Druckenmiller wants to raise taxes now on capital gains and dividends, bringing both up to ordinary income rates. He says the current tax code represents "another intergenerational transfer, because 60-year-olds are worth five times what 30-year-olds are."

And 65-year-olds are "much wealthier than the working-age population. So the guy who's out there working—the plumber, the stockbroker, whatever he is—he's paying the 40% rate and the coupon clippers who are not working anymore are paying a 20% rate."

Ah, but what about the destructive double taxation on corporate income? The Druckenmiller plan is to raise tax rates on investors while at the same time cutting the corporate tax rate to zero.

"Who owns corporations? Shareholders. But who makes the decisions at corporations? The guys running the companies. So if you tax the shareholder at ordinary income [rates] but you tax the economic actors at zero," he explains, "you get the actual economic actors incented to hire people, to do capital spending. It's not the coupon clippers that are making those decisions. It's the people at the operating level."

As an added bonus, wiping out the corporate tax eliminates myriad opportunities for crony capitalism and corporate welfare. "How do the lobbying groups and the special interests work in Washington? Through the tax code. There's no more building plants in Puerto Rico or Ireland and double-leasebacks and all this stuff. If you take corporate tax rates to zero, that's gone. But in terms of the fairness argument, you are taxing the shareholder. So you eliminate double taxation. To me it could be very, very good for growth, which is a huge part of the solution to the debt problem long-term. You can't do it without growth."

Amid the shutdown nonsense, this week's debt-ceiling accord did create an opening for some reform before the next deadline early next year. So what should Republican reformers like Paul Ryan do now?

"I would go for something simple that is very, very tough for the other side to argue, for example, means-testing Social Security and Medicare," which would adjust benefits by income. He notes again his impending eligibility for a monthly government check.

"I don't need it. I don't want it. I could also make the argument that every health expert will tell you that wealthy people live 4.5 years longer than the middle class or the poor. So I'm going to get paid 4.5 years more than the middle class or the poor," he says. "It's not that many dollars, but I think it would be a great symbol in seeing exactly how serious they are."

But Mr. Druckenmiller is not sure, so soon after the failed attempt to defund ObamaCare, that Republicans should demand entitlement reform in exchange for the next debt-limit vote this winter or spring. "Maybe they need a break," he says. "I think a much more effective strategy would be for them to publicly shine a light on something so obvious as means-testing and take their case to the American people rather than go through the actual debt limit."

If Mr. Obama rejects the idea, "then we will really know where he is on entitlement reform." For this reason, Mr. Druckenmiller views means-testing as "really the perfect start—and it should only be a start—to find out who's telling the truth here and who's not."

The main driver of the ballooning federal debt is wealth transfer payments. Indeed, more than two-thirds of the federal budget is money that goes from one taxpayer's pocket into someone else's. Some of this is naked wealth redistribution, like food stamps and other welfare. But much of it is what some call "earned" payments, like Social Security and Medicare -- money that has been taken from workers' paychecks for decades with the promise of a retirement return. The solvency of these programs, however, is in jeopardy.

Social Security already runs an annual deficit -- about $200 billion this year -- which will only grow worse as fewer workers support more retirees. From the start, politicians have raided the Social Security "trust fund" and spent the money on other general fund projects, leaving the program as a wealth transfer one instead of an investment as it's billed. Economist Walter Williams explains, "What the Treasury Department does is give the Social Security Trust Fund non-marketable 'special issue government securities' that are simply bookkeeping entries that are IOUs."

Now that benefits paid exceed taxes collected, the problem has become acute. According to the Social Security board of trustees, in 1945, there were 42 workers for every retiree; the current ratio of three workers to every retiree is unsustainable. Strictly speaking, Social Security is not a Ponzi scheme, in part because it's not against the law. Indeed, it is the law. (Try not paying payroll taxes -- a.k.a., "investing" in the system.) But it is structured exactly like a Ponzi scheme, and it will eventually fail for the same reasons.

Of the gap between Social Security taxes collected and benefits paid out, The Wall Street Journal's William Galston writes, "To close that gap while maintaining scheduled benefits, we would need to enact an immediate increase in the payroll tax rate from 12.4% to 15.9%. For workers earning $50,000 a year, that would mean a tax increase of $900, nearly 2% of gross income. And employers would have to match it. For workers making the maximum now subject to payroll taxes (a bit under $120,000), taxes would rise by $2,100."

If the income cap were lifted, workers at higher incomes would face an even more staggering tax increase. And yet as it stands, the payroll tax is regressive in that it hits lower income families disproportionately. If the income cap were doubled, it still wouldn't fix the problem. Galston notes, "One might imagine that such a sizable increase in covered earnings would be enough to stabilize the system for the long term. In fact, the CBO calculates, it would reduce the imbalance by only 30%. Indeed, eliminating the cap and taxing all earnings would solve just 45% of the problem."

Meanwhile, the expected return on the 12.4% in Social Security withholding from our income is practically criminal. Consider the potential return of investing 12.4% of a typical middle class income in indexed mutual funds, where decent investments would yield perhaps multiple millions of dollars over 30 years. Over a retirement span of 20 years or so, annual withdrawals could be six figures while still leaving a good chunk of change making money.

Compared to that, Social Security looks like the poorest investment ever concocted. In fact, from that perspective, Social Security is stealing our money by mandating that it do something for us in a worse way than we can ourselves.

Or put it another way. Financial advisers often recommend putting 10% to 15% of your income toward "retirement" (whatever that means to you). The potential return on that 15% over 30 years is fantastic. Unfortunately, Social Security is already taking over 12%, while giving us miserable returns. So for savers, Social Security is costing us significant returns that we could have realized but won't. What a "safety net."

In spite of the facts, Social Security has always been one of the most popular programs the federal government runs, and the overwhelming choice of voters is to do nothing to fix it -- let alone returning to the constitutional norm of the federal government staying out of your retirement. So we understand politicians desperate for votes not wanting to touch this beloved system. But Social Security is built on a half-truth at best, and it's unsustainable.